Fitch Ratings assigns an ''A+'' rating to Osceola County, Florida''s (the county) approximately $43.3 million in sales tax revenue refunding bonds, series 2009A. The bonds are expected to price in November 2009. Proceeds will be used to refund the outstanding sales tax revenue bonds, series 1999. Concurrently, Fitch also affirms the $43.3 million in outstanding sales tax revenue bonds, which will be refunded with this issuance, at ''A+''. The Rating Outlook is Stable.
The ''A+'' rating reflects the strong coverage provided by pledged revenues, satisfactory legal provisions, and consistent financial results. The rating also incorporates the county''s tourism dependent economy and below average wealth levels. Credit concerns include the potential incorporation of Poinciana Villages, which would reduce the percentage of gross revenues distributed to the county, lowering coverage levels.
The bonds are secured by the county''s portion of the local government half-cent sales tax. The state levies a 6% sales tax and distributes the revenue collected within each county to the county and its incorporated municipalities according to a population-based formula. Currently the county receives 71.1% of total revenue collected within the county while the two incorporated municipalities, Kissimmee and St. Cloud, receive 19.7% and 9.2% respectively. On a pro forma basis, current maximum annual debt service (MADS) coverage by audited fiscal 2008 sales tax revenue on this issuance and all outstanding parity debt is 3.5 times (x). Estimated fiscal 2009 results show an 8.8% decline in revenues reducing coverage to a still strong 3.2x. A feasibility study has been conducted on the potential incorporation of Poinciana Villages, which spans portions of Osceola and Polk counties. For the incorporation to take place, the state legislature would need to pass a bill allowing for incorporation which would be followed by a voter referendum in November 2010. Current estimates indicate the incorporated area would include roughly 17% of the county''s population. Based on estimated fiscal 2009 results, coverage would remain above 2.7x if the incorporation were to take place.
Osceola County is located roughly 14 miles south of Orlando and adjacent to Disney World, leading to the county''s concentration in tourism. The Walt Disney Co., rated ''A'' by Fitch with a Stable Outlook, employs 61,500 employees in Orange and Osceola counties while Osceola''s other large employers are largely tourism, retail, and health care related. A combination of the rapid population growth and Florida''s recent housing market bubble led to marked growth in assessed value (AV) which increased 140% in five years from fiscal 2003 to fiscal 2008. New construction accounted for approximately 39% of the increase. The current housing market correction has led to a moderate 1.3% decline in AV in fiscal 2009 and a 16.7% decrease for fiscal 2010. Unemployment has increased with the economic downturn to 11.8% for August 2009 from 6.8% a year prior.
Financially, the county has been consistently strong with surpluses in four out of the last five years. Fiscal 2008 ended a $3.5 million surplus increasing the unreserved fund balance to an ample 26.9% of spending. Estimated results for fiscal 2009 show a modest $3 million drawdown due to one-time capital projects for roads. The fiscal 2010 budget is balanced with no use of reserves. The county has proactively addressed recent Florida property tax reforms and the weakening tax base through a combination of personnel reductions, operating efficiencies, and the discontinuation of the sick leave payout program.
Overall debt levels are moderate at $2,931 per capita and 3.5% of market value although amortization is slightly below average with 42% of principal being retired within ten years. Capital needs are limited and concentrated in roads. Additional debt plans are limited to $25 million in limited general obligation bonds to purchase environmental lands next fiscal year.
Additional information is available at ''www.fitchratings.com''.
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cindy.stoller@fitchratings.com